Taxation; Charitable and Scientific Institutions

Subject:

Requested By: Mr. Hamlin L. Wade Mecklenburg County Tax Attorney

Questions: Is Electric Power Research Institute, Inc., a non-profit charitable and scientific institution?

 

1.  
2. Is real and personal property owned by Electric Power Research Institute, Inc., and wholly and exclusively used for non-profit charitable or scientific purposes exempt from ad valorem taxation?

    

Conclusions: Yes.

 

1.  
2. Yes, subject to statutory limitations herein discussed.

    

Inquiry has been made as to whether real and personal property of Electric Power Research Institute, Inc. would be exempt from ad valorem taxation under G.S. 105-278.7, assuming proper application therefor were made under G.S. 105-282.1.

Electric Power Research Institute, Inc. is a non-profit corporation incorporated under the laws of the District of Columbia, whose purposes are stated in its charter to be:

"(a) To promote, engage in, conduct and sponsor research and development with respect to electricity production, transmission, distribution and utilization, and all activities directly or indirectly related thereto;

(b)

To provide a medium through which investor-owned, government-owned and cooperative-owned power producers and all other persons interested in the production, transmission, distribution or utilization of electricity can sponsor electricity research and development for the public benefit;

(c)

To promote, engage in and conduct research in both the pure and applied sciences for the advancement and betterment in the public service of the production, transmission and distribution of electric power;

(d)

To sponsor scientific research and development in the electric power field with a view towards providing economical, reliable electric service to the public with minimal adverse environmental effects;

(e)

to discover, devise, develop, invent and create through study and research, the methods and means to improve the production, transmission, distribution and utilization of electric power, in order to insure the adequate power supply that is vital to the progress of the nation and the world community;

(f)

To seek and ascertain, through scientific research and development, solutions to environmental problems related to the production, transmission, distribution and utilization of electric power;

(g)

To undertake, conduct, engage in or direct research and development activities for the discovery or improvement of new or more efficient forms of electric power production, transmission and distribution and of improved utilization, including new or more efficient uses, of electric power by the public;

(h)

To discover and develop, through scientific study, research, ways and means to protect, conserve, and maximize the efficient utilization of finite natural resources used in the production, transmission and distribution of electric power;

(i)

To provide a medium for coordination and co-operation and for the exchange of information for all organizations and persons, public or private, concerned with electric power and scientific research and development;

(j)

To ascertain, prepare and disseminate information and data with respect to scientific research and development activities in the field of electric power;

(k)

To have all those powers conferred upon corporations organized under the Non-profit Corporation Act necessary to effect any or all of the purposes for which the corporation is formed subject to any limitations contained in these Articles of Incorporation or the laws of the district of Columbia."

G.S. 105-278.7 makes the following provisions regarding the exemption of real and personal property used for educational, scientific, literary or charitable purposes:

"(a) Buildings, the land they actually occupy, and additional adjacent land necessary for the convenient use of any such building shall be exempted from taxation if wholly owned by an agency listed in subsection (c) below, and if: (1) wholly and exclusively used by its owner for nonprofit educational, scientific, literary, or charitable purposes as defined in subsection (e), below . . .

(b)

Personal property shall be exempted from taxation if wholly owned by an agency listed in subsection (c) below and if: (1) wholly and exclusively used by its owner for nonprofit educational, scientific, literary or charitable purposes . . .

(c)

The following agencies, when the other requirements are met, may obtain property tax exemption under this section: (1) A charitable association or institution . . . (4) A scientific

association or institution . . .

(f)

Within the meaning of this section . . .

(2)

A scientific purpose is one that yields knowledge systematically through research, experimentation, or other work done in one or more of the natural sciences . . .

(4)

A charitable purpose is one that has humane and philanthropic objections; it is an activity that benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward . . ."

Before looking further at the statute, it might be well to consider the following: (a) Section 501(c)(3) of the Internal Revenue Code exempts from federal income tax organizations "organized and operated exclusively for . . . charitable, scientific . . . or educational purposes, and under that section the Internal Revenue Service has determined this corporation to be exempt (Determination Letter dated 22 September 1972); (b) G.S. 105-125 exempts from corporate franchise tax "charitable . . . scientific or educational corporations, not operating for a profit", and under that section the Department of Revenue has determined the corporation to be exempt (Determination Letter dated 14 December 1979); (c) G.S. 105-130.11(a)(3) exempts from corporate income tax "corporations organized for . . . charitable, scientific . . . or educational purposes . . . no part of the net earnings of which inures to the benefit of any private stockholder or individual", and under that section the Department of Revenue has determined the corporation to be exempt (Determination Letter dated 14 December 1979); and (d) G.S. 105-164.14(b) authorizes refunds of certain sales and use taxes paid by "educational institutions not operated for profit, churches, orphanages and other charitable or religious institutions and organizations not operated for profit," and under that section the Department of Revenue has determined the corporation to be qualified to claim and receive such refunds (Determination Letter dated 11 December 1979).

While we do not believe that any one or more of the foregoing determinations is dispositive of the question (they might all be wrong, or niceties and nuances of applicable statutes might lead to contrary results), nonetheless we feel that they form a circumstantial background that ought not be ignored.

Against that background, we note the various conditions of G.S. 105-278.7 that must be met in order that the exemption apply:

(1) Only buildings, land occupied by such buildings, and adjacent land necessary to the convenient use of such buildings, shall be exempt, and all personal property shall be exempt, if wholly owned by a non-profit charitable or scientific association or institution. By definition, a corporate owner is "charitable" if its activity "benefits humanity or a significant rather than limited segment of the community without expectation of pecuniary profit or reward", and is "scientific" if its activity "yields knowledge systematically through research, experimentation, or other work done in one or more of the natural sciences." G.S. 105-278.7(f). Reference to the purposes set out in the charter impels the conclusion that the corporation is non-profit and that its purposes are both charitable and scientific. This conclusion would of course be refuted and overcome if the corporation were found in actuality to serve other than eleemosynary purposes, but none of the information provided to us would suggest that such might be the case. We conclude that the corporation is indeed a nonprofit charitable and scientific institution, and for the purposes of this opinion we assume that it wholly owns the property about which it has inquired.

(2) Not only must such property be owned by such a corporation, but it must be used wholly and exclusively by the corporation for nonprofit charitable or scientific purposes. G.S. 105-278.7(a) and (b). Since the corporation is simply seeking information as to whether its property would be exempt if it were located in this State, no definitive answer can be given without knowing what the property would be and how it would be used. However, if the real property were limited to buildings, land occupied by buildings and necessary adjacent land, and if all real and personal property were used for the nonprofit scientific and charitable purposes set out in its charter, then such property would in our opinion be exempt from ad valorem taxation, if application therefor were properly made as provided in G.S. 105-282.1.

Rufus L. Edmisten Attorney General

Myron C. Banks Special Deputy Attorney General